UK local government pension pool launches engagement programme on just transition

Border to Coast Pensions Partnership, UK Local Government Pension Scheme (LGPS) pooling entity, has launched a new engagement programme on the just transition.

The programme has three strands which include: piloting engagement with an emerging market energy utility, joining the Financing a Just Transition Alliance (FJTA) and joining the Royal London Asset Management to engage with banks.

According to the Intergovernmental Panel on Climate Change’s definition, a just transition is a set of principles, processes and practices that aim to ensure that no people, workers, places, sectors, countries or regions are left behind in the transition from a high-carbon to a low-carbon economy.

Colin Baines, Border to Coast’s stewardship manager, said: “For institutional investors, contributing to a just transition offers a way of reducing systemic risks, realising fiduciary duties, identifying material value drivers, and generating positive social impacts.

“Our new value-adding engagement will offer support to companies, including high-level sector expectations, best practice case studies, and expert feedback on policy drafts. By integrating just transition, we hope to avoid stranded communities, workers, and customers, as well as stranded assets.”

Border to Coast is one of the eight LGPS pools in the UK and has pledged to achieve net-zero emission by 2050 or sooner. The LGPS is one the largest pension schemes in the UK, with more than 6.1m members working in local government or for other employers that participate in the programme. Border to Coast is responsible for approximately £50bn of assets which it invests on behalf of its 11 partner funds.

Three strands of the strategy

Regarding the just transition in emerging markets, the LGPS pool outlined that the engagement will build on the engagement plan that secured the world’s first dedicated just transition strategies from energy utilities operating in the UK, such as SSE, Centrica, Eon, EDF, and Scottish Power. 

The pool currently has £1.1bn invested in emerging market equities, the majority of which in are held in Chinese, Indian and Taiwanese shares.

As part of the second strand of the engagement strategy, the LGPS pool has committed to join FJTA, which has 50 institutional investor members and is coordinated by the London School of Economics Grantham Institute. Each member within the alliance commits to integrating the just transition into climate strategies.

Finally, Border to Coast stated that the third strand of the programme “prioritises engagement with banks”, with the area of focus on material decarbonisation challenges for UK banks and how these can be approached considering social risks and opportunities.